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Maintaining your profit margin is how you stay in business.
Profit margin refers to the percentage of revenue you keep after subtracting your costs. Each item you sell should be priced to earn a margin, and when you subtract the full cost of running your business from total earnings, you get a clear picture of overall profitability. When income exceeds expenses, the business makes money — and can keep operating.
Margins vary by industry. In music retail, overall profit margins typically range from 10–15% after factoring in overhead. Individual products often earn margins between 20–40%. While these are useful benchmarks, there are many strategies for improving this metric.
In this blog, we’ll cover five ways to increase music store profit margins — including how a point of sale (POS) system can help.
Let’s dive in.
1. Stock Up on High-Margin Products
There are many different kinds of music stores. Some sell a wide variety of instruments, while others focus on a specialty, like guitars, pianos, or violins. As a business owner, you get to decide what kind of store you want to run, but one factor that should influence your decision is profit margin.
Instruments
Start by researching which instruments have higher and lower profit margins to determine what to stock. String and percussion instruments tend to have lower margins. More specifically, mass-produced guitars from popular brands like Fender and Gibson earn lower margins as they’re sold in high volumes.
On the other hand, rare, vintage, or niche instruments — as well as digital keyboards — are known for having high profit margins. Be aware of the margin you’re making on each instrument you sell, and use sales reports to compare the profitability of different products.
Accessories
In music stores, the highest margins tend to come from small items like these:
- Strings
- Guitar picks
- Reeds
- Drumsticks
- Drumheads
- Music stands
If you neglect these smaller items, you may be missing out on significant profits. Add accessories and other lower-cost products, and display them with the instruments they complement — guitar picks and strings with guitars, reeds with woodwinds, and drumsticks with drums.
Let’s say you purchase a guitar from a supplier at a wholesale price of $120. You set your price at $200, creating a 40% profit margin and earning $80 in profit. You also want to sell guitar picks, so you buy them in packs of 10 from a wholesaler for 50 cents. Then you sell the same 10-pack at your music store for $5, resulting in a 90% profit margin and earning $4.50 in profit.
While you’re making more money on one guitar than on a set of picks, the margin on the picks is higher, and you’re likely to sell them more often, meaning the profits add up over time.
As you decide what products to sell at your music store, look for instruments with higher margins, as well as small music accessories you can mark up. These items help you improve your business’ overall profitability.
2. Upsell Profitable Items
A simple tactic to sell more of these small, high-margin products is to upsell them. Train your employees to suggest high-margin accessories to customers at checkout.
Another effective strategy is to create bundles. For example, if you sell trumpets, you can create a starter bundle with the instrument, a carrying case, cleaning supplies, and a book of beginner sheet music.
A POS system assists with upselling by prompting employees at the register, and some systems also offer basic sales commissions to incentivize this. Additionally, a comprehensive POS can help you set up bundle features so you can offer a lower price for the bundle than the items individually.
3. Offer Services
Offering services is a great way to improve music store profit margins. Instruments tend to have margins ranging from 30–40%, while services can command higher margins of up to 80%. Here are some tips for offering music-related services.
Music Lessons
If you want to offer music lessons, you need to either teach them yourself or hire instructors to teach in your store. As you plan for this service, research what other music teachers in your area are charging. Ideally, you can pay instructors a fair rate, charge a competitive price to students, and still make a profit.
Music lessons also build customer loyalty. Students who have a positive experience with lessons often continue them over the long-term, creating recurring revenue for your business. And when they need a new instrument, accessory, or repair, they’re more likely to buy from you rather than a competitor.
Repairs
Offering repairs helps you become a one-stop shop for all of your customers’ music needs. Similar to lessons, you can either handle repairs yourself or hire qualified repair technicians. Let customers who purchase instruments know they can bring them back to your store for service if needed, and be sure to keep them informed throughout the repair process.
Related Read: Work Order Management in 7 Steps With Music Shop 360
Rentals
Instrument rentals tend to be very popular, especially among students in school bands. It’s a strong long-term investment, as an instrument only needs to be purchased once but can be rented out for years to come. Once rental fees exceed the instrument’s initial cost, this service generates pure profit. Some music stores also offer rent-to-own plans, allowing customers to pay off the instrument over time and eventually own it permanently.
Let’s say you rent out clarinets, and the wholesale cost of each clarinet is $100. If you charge $20 per month, you earn back the initial cost of the instrument in five months. If that customer returns the instrument and someone else rents it for another five months — you’ve now profited $100 on that single clarinet.
Keep in mind that not all instruments become profitable at the same rate — some may take up to a year to recoup your investment.
When offering these music services, a POS system can be a valuable resource. Many modern systems have modules for lesson scheduling, work orders, rental tracking, and automated, recurring billing. These tools help make services easier to manage.
4. Lower the Cost of Your Inventory
Maintaining the quality of the musical instruments and accessories you sell is vital to your business’ reputation and to keeping customers loyal. But proven strategies may allow you to pay less for the same caliber of inventory.
Start by investigating multiple suppliers. Online product catalogs — sometimes available through POS systems — let you compare prices between vendors so you can find the best deal.
The prices suppliers charge for inventory may seem fixed, but some rates are negotiable. For example, if you place large orders, you may be able to negotiate bulk discounts. If you find a trustworthy supplier you enjoy working with, long-term loyalty can also lead to more favorable purchasing terms.
Related Read: 12 Vendor Relationship Management Best Practices for Music Stores
5. Sell Online
Selling online allows you to expand your business without opening an additional brick-and-mortar location. While e-commerce does come with costs — like website management, shipping, and customer service — you can save on overhead and increase your profit margin. Hosting your own site is also a great way to compete with large online retailers, like Guitar Center, Sweetwater, and Amazon.
Related Read: For Music Stores: How To Create Your Omnichannel Retail Strategy
Increase Music Store Profit Margins With Music Shop 360
Growing your profit margins is one of the most effective ways to strengthen your business — especially during slow seasons when sales may stagnate. From cutting costs to expanding online, there are several strategies you can use to improve your music store’s profit margins.
To start, focus on small, high-margin products — especially by upselling them alongside larger instruments. Prioritize high-margin services, and reduce inventory costs by sourcing from competitive suppliers and negotiating bulk discounts. Selling online, rather than opening an additional location, can also save you money on overhead costs.
A POS system helps you implement these strategies. Music Shop 360 is an all-in-one, cloud-based POS solution built just for music stores. With both general and music-specific retail features, you’re fully equipped to run your business and boost profit margins.
Music Shop 360’s detailed sales reports identify your most profitable products, helping you optimize your ordering. Customized service modules track lessons, repairs, and rentals, while e-commerce tools get your website up and running so you can serve customers nationwide. These features save time, reduce costs, and increase profits.
To see Music Shop 360 for yourself, schedule a demo today!
